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GI woes dent Suncorp profit

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Bad weather and weak investment earnings have contributed to an 8.4% decline in Suncorp full-year earnings.

Group net profit, which includes the general insurance, life and banking divisions, fell to $1.04 billion from $1.13 billion the previous year.

But CEO Michael Cameron, delivering his first annual result since taking charge last year, says Suncorp is making progress reducing its general insurance claims costs, and the operating environment has stabilised.

“I expect the industry will continue to see high levels of competition but, notwithstanding that, I think it will be a fairly stable and rational market,” he told

General insurance gross written premium (GWP) grew 1.8% to $9.03 billion for the year, while investment income from insurance funds fell 36.3% to $254 million.

The division’s net profit declined 17.5% to $624 million and the underlying insurance trading ratio fell to 10.6% from 14.7% a year earlier.

Natural hazard claims were $60 million above Suncorp’s allowance following a late jump driven by the two east coast lows in June.

Mr Cameron says the company has bought additional reinsurance cover for the aggregation of medium-sized claims, which will reduce the volatile impact of natural hazards.

The insurance investment result was hit by the difficult environment and end-of-year accounting losses on a large portfolio of inflation-linked bonds.

“We want to have a good look at that in the coming 12 months,” he said. “We are likely to consider reducing our exposure to some of those instruments, but we need to be careful because at some point in time inflation will return and we will see them being a very valuable device to protect our capital and our earnings.”

Commercial insurance GWP increased 2.1% and personal insurance GWP gained 1.6%.

“We are seeing signs that premium rates are stabilising across commercial lines and we expect market conditions to continue to improve,” Insurance CEO Anthony Day said.

Suncorp says the compulsory third party (CTP) portfolio achieved strong growth in NSW and the ACT, while the company has also entered the SA market.

The consumer motor business reported single-digit price increases with stable retention rates, while home insurance reported mid-single-digit GWP growth.

Suncorp says a company-wide restructure announced by Mr Cameron in February was completed early last month, delivering $80 million in annualised savings at a charge of $55 million.

Under the enhanced reinsurance program, natural hazards aggregate cover will provide $300 million of protection after the retained portion of natural hazard events greater than $5 million reaches a total of $460 million.

Additional cover has also been purchased to reduce the maximum event retention for a second Australian event to $200 million and, for a third and fourth event, to $50 million.

Suncorp New Zealand says its general insurance business, which consists of Vero and AA Insurance, delivered an insurance trading result of $NZ178 million ($165 million), up 11.9% on the previous period. GWP gained 3.2% due to growth in personal lines through both the direct and intermediated channels.